UK companies cautiously raised shareholder payouts last year as firms started to recover from the effects of the Brexit-hit pound.

Dividends grew just 3% on a headline basis to $95.7 billion (£68 billion) in 2017 in Britain, according to the latest Janus Henderson Global Dividend Index, marking a rebound following a 3.5% drop a year earlier.

The “relatively modest” increase reflected a large number of companies falling out of a ranking of the most valuable 1,200 firms based on market valuation following the post-Brexit vote collapse of sterling.

“Sterling remained sharply lower against the dollar in the first half of the year, and its recovery in the second half was not enough to prevent an exchange rate loss for the year overall,” the report said.

However, the UK still managed to outpace the rest of Europe, which saw dividend growth rise only 1.9% to $227.4 billion (£161.8 billion) on the back of steep cuts in fourth-quarter shareholder payouts from the likes of French utility firms and Spain’s Telefonica.

Stock prices fall

As a result, France posted flat dividend growth for 2017 while Spain suffered its third consecutive year of declines.

Other major countries including the US, Japan, Switzerland, Hong Kong, Taiwan and the Netherlands all enjoyed a knockout quarter, with dividends hitting new records.

It helped drive total global payouts up 7.7% year on year to a record $1.25 trillion (£889 billion).

Ben Lofthouse, director of global equity income at Janus Henderson, said: “While equity markets have been volatile recently, dividend payments are reflective of corporate health and economic conditions, and we expect them to be much more stable.”

He added that 2017 was a “great year for income investors” as dividend growth was broadly spread across industries and countries, and three of the largest global economies – accounting for the US, EU and China – were all expanding at the same time.

The next few months are set fair, and we expect global dividends to break new records in 2018
Ben Lofthouse, Janus Henderson

“The next few months are set fair, and we expect global dividends to break new records in 2018”

“As a result, companies are seeing rising profits, and healthy cash flows, and that’s enabling them to fund generous dividends. The record payout last year was almost three-quarters higher than in 2009, and there is more to come.

“The next few months are set fair, and we expect global dividends to break new records in 2018.”

Janus said it expects headline growth of around 7.7% for 2018 as a whole, pushing dividend payouts to a fresh record of $1.3 trillion (£925 billion).

On an underlying basis – which excludes exchange rate effects, one-off special dividends and other factors – dividend growth was 6.8% last year, with every region seeing an increase.

By sector, dividend growth was also strong across the board, except for telecoms which fell flat.

Mining companies saw the fastest growth in payouts – up 27.2% on an underlying basis – having benefited from cost-cutting drives that took place during a downturn in commodity prices, which have since recovered.

The rebound in mining dividends helped push up shareholder payouts in the UK on an underlying basis, up 10% on the year.

Janus Henderson analysed dividends paid by the 1,200 largest firms by market capitalisation.